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UPS, FedEx Drive Into Domestic Deliveries UPS和联邦快递或推动中国快递业洗牌

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There’s quite a bit of noise in the fast-growing package delivery space these last few days as companies large and small clamor for position in China’s booming e-commerce market, setting the stage for yet another bubble similar to the one now infecting the e-commerce space itself. Less than a month after the parcel delivery arm of China’s postal service announced plans for a domestic IPO to raise up to $1.6 billion (previous post), media are reporting that multinational giants UPS (NYSE: UPS) and FedEx (NYSE: FDX) are both set to receive the nod from Beijing to start offering domestic delivery services, adding 2 major new competitors to the already crowded market. (Chinese article) Both UPS and FedEx have been limited up until now to delivering packages to China from overseas, and each has been lobbying for years for rights to deliver packages domestically — an area that has seen explosive growth in the last 5 years with the rapid rise of e-commerce in China. It’s interesting that Beijing now may be finally preparing to allow them to operate domestically, just as China Postal Express gets set to make an IPO to fund its own expansion. I suspicion that Beijing wants to bring some order to the parcel delivery space, which has become quite unruly with the e-commerce boom. New reports about bombs, weapons and other illicit materials being delivered through smaller, unscrupulous courier services now appear regularly in the Chinese media, which looks like Beijing’s way of saying the sector needs to consolidate around a much smaller group of perhaps a dozen players who can run more efficient operations and controls to prevent such illegal activities. Bringing experienced veterans like UPS and FedEx into the picture could quickly help to clean up the industry, driving many of the smallest players either out of business or into mergers with larger rivals, creating a handful of large-scale, more efficient domestic players. Meantime, Alibaba’s TMall, China’s e-commerce leader, is also making its own moves in the package delivery space, with Chinese media reporting the company has partnered with 9 major courier services to improve delivery of goods sold on its platform. (Chinese article) While unrelated to the UPS and FedEx news, this step by Alibaba also looks directed at trying to improve efficiency in the package delivery space by focusing on a handful of the biggest services to improve customer satisfaction and cut down on less efficient and even illegal activity by some of the smaller players. From a broader industry perspective, look for more of these kinds of moves to occur in the next year, with other major e-commerce players forging their own similar ties with the bigger, stronger delivery services. That should bode well for both UPS and FedEx if they get domestic licenses, as well as China Postal Express, as all are big, experienced companies that can quickly offer quality and reliable services for most major Chinese cities. The losers in the equation will be the smaller delivery companies, though some of the better run operations could benefit as they will be become attractive acquisition targets for big names looking to quickly expand their coverage networks.

Bottom line: The arrival of UPS and FedEx to China’s domestic parcel delivery market reflects Beijing’s desire to clean up the unruly sector, which has boomed with the rapid rise of e-commerce.

Related postings 相关文章:

◙ Post Office Delivers Attractive IPO 中邮速递推进IPO 或将受热捧

◙ E-Commerce: 360Buy Awaits IPO Window, Amazon Expands 京东IPO融资心切 亚马逊物流扩张加剧竞争

◙ Retail: Tesco Goes Online, Perry Ellis in New JV 零售：乐购推出网购，派瑞•艾力斯成立合资企业

IPOs: BMW Distributor Crashes, PICC Revs Up 永达汽车搁置IPO计划 中国新股持续遇冷

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Just a week after a top Chinese auto rental firm scrapped its plans for a New York IPO, another auto specialist, Yongda Automobile Services has also junked plans for a listing in Hong Kong, reflecting not only cooling overseas demand for Chinese IPOs but also the chill that is settling over the country’s auto sector. But the true test for offshore Chinese IPOs could still be coming, as insurance major PICC gets set for a mega-IPO in Shanghai and Hong Kong to raise up to $6 billion. Let’s look at the Yongda news first, which has seen the operator of China’s largest distributor of cars from luxury German automaker BMW (Frankfurt: BMWG) cancel its plans for a Hong Kong plan to raise up to $430 million due to anemic demand. (English article) The decision comes just a week after auto rental specialist China Auto also formally scrapped its plans for a New York IPO after originally filing for the offering back in January. (previous post) The failure of both of these IPOs reflects not only weak sentiment for new offerings in general, but also the anemic state of car sales in China, which passed the US in 2010 to become the world’s largest auto market but has seen growth slow dramatically over the last year as China’s economy slows. While the failure of China Auto’s IPO isn’t too surprising, the withdrawal of the Yongda listing was a bit more unexpected because sales of luxury cars like BMW seemed to be more immune to the slowdown in China. Thus this lack of investor interest seems to indicate that markets expect an imminent slowdown as well for the luxury segment, which is still seeing growth in the 30-40 percent range even as broader market gains have fallen into the low single digits. Meantime, People’s Insurance Company of China (PICC), one of China’s top insurers, is hoping to avoid a similar fate to Yongda by bringing more major investment banks into its dual listing plans. (English article) Foreign media are reporting the company has added 14 investment banks, including powerhouses like Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS), to the group underwriting the Hong Kong portion of its IPO aiming to raise around $3 billion from foreign investors. The addition of so many major foreign investment banks, combined with PICC’s strong state backing, means that this offering is very likely to go forward despite weak sentiment in the broader market, though I wouldn’t expect it to price very strongly and the final amount of funds raised in Hong Kong could be closer to $2 billion. One of the few Chinese companies to successfully make a major Hong Kong IPO in recent months was another insurance company, New China Life (HKEx: 1336), which raised $1.3 billion in the Hong Kong portion of a dual listing late last year. The company’s shares initially surged, but have since given back most of the gains and are now just slightly ahead of their offering price — roughly in line with the broader market. Given recent uncertainty in the broader insurance market, I wouldn’t expect too much excitement from this PICC offer though it should indeed go forward. When that happens, look for the stock to trade sideways or sink lower after its trading debut.

Bottom line: The scrapping of an IPO by China’s top BMW distributor and addition of major banks to a planned IPO for major insurer PICC reflect continued weak demand for new China offerings.

Related postings 相关文章:

◙ China Auto IPO Crashes 神州租车的IPO之梦告吹

◙ Ping An Returns to Market With Second Big Fund Request 中国平安拟发大规模可转债

◙ Year End Brings Problematic New IPO Wave 中国新一波IPO潮或无法达预期效果

West Launches New Attack on Huawei, ZTE 西方对华为和中兴通讯发起新攻击

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The bad news never seems to end for embattled telecoms equipment makers Huawei and ZTE (HKEx: 763; Shenzhen: 000063), which have become magnets for attacks from global rivals seeking to curb their gains into the lucrative US and European markets. The latest move has seen the European Union launch an anti-dumping probe against the Chinese pair over allegations that they receive unfair subsidies from Beijing, according to foreign media reports. (English article; Chinese article) It’s not surprising that this investigation is coming in Europe, since most of Huawei’s and ZTE’s biggest global rivals are based there, including Ericsson (Stockholm: ERICb), Nokia Siemens Networks and Alcatel Lucent (Paris: ALUA). All those companies have complained for years that Huawei and ZTE can offer lower prices partly due to strong support from Beijing, which indirectly subsidizes them through policies like export rebates. From my perspective, the fact that the EU has launched this investigation is not surprising at all. What is more interesting is the timing of the move, as well as the broader implications of the probe for a recent major push by Huawei and ZTE into the faster-growing and less controversial smartphone sector. In terms of timing, this anti-dumping investigation is the latest in a recent series of government probes in the US and Europe against not only Huawei and ZTE but also a growing number of other Chinese firms in up-and-coming sectors. Both companies have been largely locked out of the US network-building market to date over concerns their equipment could be used for spying by Beijing. ZTE received a major setback on that front early last year when Sprint (NYSE: S), one of the top 4 US wireless carriers, rejected its bid to help build a new 4G telecoms network (previous post); Huawei received a similar setback months later when it was blocked from bidding for US government contracts to upgrade some of the nation’s emergency telecoms networks. (previous post) Even top Chinese mobile carrier China Mobile (HKEx: 941; NYSE: CHL) has gotten caught up in the fray, with US regulators earlier this month citing security concerns as a reason for potentially vetoing the carrier’s application to offer service between China and the US. (previous post) This latest EU move is unrelated to security concerns, but is rather based on accusations of unfair subsidies from Beijing, which has become another popular tool for Western firms to slow down the advance of aggressive Chinese rivals into their markets. Both the EU and US regularly launch anti-dumping investigations against Chinese sectors, though most of those have usually targeted low-end manufacturing areas like construction materials and auto parts. But the unfair trade attacks moved into the high-tech space last year when the US has launched a high-profile investigation against China’s solar panel industry, which could soon result in big punitive tariffs. (previous post) This new series of attacks against such higher tech companies could quickly become a major obstacle for China as it tries to move away from its traditional strength as a low-end manufacturing powerhouse to higher-tech products that command bigger profit margins and rely less heavily on the cheap labor. From the perspective of Huawei and ZTE, equally worrisome is the prospect that the US and Europe could soon turn their attention to the companies’ smartphone units, which they are aggressively building up as a less controversial alternative to their traditional networking equipment businesses. If the EU believes the 2 companies’ networking equipment business is unfairly subsidized, it should logically believe the same is true for their cellphones. At the end of the day, I suspect there is some truth to the anti-dumping and possibly even the security concerns, which Chinese companies will need to address if they really want to become global players. At the same time, however, I do believe that much of this activity also represents foreign rivals’ attempts to stop encroachment into their home markets by Chinese firms — a reality that Huawei, ZTE and other aspiring Chinese high-tech firms will have to learn to deal with more effectively if they really want to become top global players.

Bottom line: An EU anti-dumping probe against Huawei and ZTE is the latest move by their global rivals to try and keep them out of lucrative Western markets.

Related postings 相关文章:

◙ ICBC, Huawei: It’s Cold Out There 工商银行、华为：国外市场冷清

◙ Huawei Goes on the Offensive 华为发起攻势

◙ Solar Storm Heats Up in US, China 中美太阳能产品征税之争升温

Nokia Siemens Accuses Huawei 诺基亚西门子指责华为抄袭其宣传材料

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I commended telecoms equipment leader Huawei for breaking with its history of maintaining a defensive posture on the global stage by finally making an offensive move after it filed an anti-monopoly complaint in Europe against a Western firm that was refusing to sell it 3G technology; but the latest accusations being leveled at the company by rival Nokia Siemens Networks look much more mundane and typical of what many foreigners traditionally expect from Chinese firms. This latest tussle is decidedly lower tech than the action Huawei took last week against a company called InterDigital (Nasdaq: IDCC) (previous post), with Nokia Siemens accusing the Chinese firm of the petty crime of copying the wording in some of its promotional materials. (Chinese article) Officials from Nokia Siemens pointed to a number of places in their materials where the wording Huawei’s materials contained similar wording. There was no comment from Huawei in the Chinese article on the allegations, so obviously the report is a bit one-sided. But if it’s true, it certainly wouldn’t surprise me, as copying by Chinese companies is by no means limited to technology and DVDs. If it really is true, I would indeed find it a bit ironic since Huawei is clearly quite a wealthy company and creating promotional materials isn’t nearly as expensive as developing new products, which would mean Huawei was simply being too lazy to go out and properly create its own marketing materials. But this kind of copying, regardless of whether it’s true in this instance, is probably more reflective of the endemic lack of respect for intellectual property and copyrights in general among Chinese firms. Huawei itself was the subject of much more serious copying allegations nearly a decade ago, when US rival Cisco Systems (Nasdaq: CSCO) sued it for intellectual property theft, in a case that was ultimately settled for undisclosed terms. I’m unaware of any additional copycat claims against Huawei since then, which indicates the company probably made a serious effort to clean up its act as part of its drive to become a major global player. That makes this latest accusation by Nokia Siemens all the more ludicrous, as clearly this kind of copying, if it’s true, is something that could have been completely avoided at little or no extra cost to Huawei. But then again, the old English proverb probably applies here as well, namely that it’s difficult to get a leopard to change its spots.

Bottom line: Nokia Siemens’ accusations that Huawei copied some of its promotional materials, if true, reflect the difficulties Chinese companies face in trying to wean themselves from copying.

Related postings 相关文章:

◙ Huawei Goes on the Offensive 华为发起攻势

◙ Huawei Follows ZTE to Lower Profits 继中兴之后华为利润也降低

◙ ICBC, Huawei: It’s Cold Out There 工商银行、华为：国外市场冷清

China Opening Telecoms With Cloud Centers 云计算或成为中国开放电信服务市场的突破口

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China’s telecoms companies have all rushed to set up new cloud computing centers, the massive data and software warehouses that allow computer users to do all their computing remotely from relatively simple desktop and laptop PCs. But now it appears that Beijing wants to develop this area so much that it’s also opening up the sector to foreign companies, with Microsoft (Nasdaq: MSFT) the latest to detail its plans for the cloud computing space in China. Media are quoting a top Microsoft global executive saying the company is applying for permission to build cloud centers in China (English article), after Microsoft said late last year it was studying such a plan for the interior city of Chongqing. (previous post) Microsoft’s entry to the space would come months after IBM (NYSE: IBM) announced in January it would help to build a massive campus near Beijing that would become China’s largest cloud computing center. (English article) From an investors perspective, these 2 developments look very interesting not only for their money-earning potential, but also because they seem to show that Beijing may finally be starting to allow foreign firms to make major investments in the lucrative Chinese telecoms services market, after years of locking them out despite agreeing to open the space under its commitments when it entered the World Trade Organization 10 years ago. This kind of opening would be consistent with recent remarks from the telecoms regulator, which said in March that the government has officially made boosting private investment in telecoms infrastructure part of its new policy. (previous post) Cloud computing would be a relatively easy area to open up to foreign investment, since right now the industry is at a very low stage of development and clearly the arrival of foreign technology and expertise from big names like Microsoft and IBM could quickly build the sector into a world-class player. Another opening of China’s telecoms services market could also come in the next year or 2 if one of China’s 3 telcos signs a mobile virtual network operator (MVNO) agreement with a major foreign telco. Such agreements have yet to come to China but are popular in other markets, and usually see a foreign telco offer its own branded service overseas using an existing carrier’s network. China Telecom (HKEx: 728) last week launched the first MVNO for a Chinese company with a partner in Britain, and I predicted that move could ultimately see the Chinese telco reciprocate by signing an MVNO that would allow a foreign telco to offer service in China. (previous post) This latest cloud development, along with the potential for a foreign MVNO in China, does seem to show that China may finally be serious about opening up its telecoms services market. Earning profits, meanwhile, could be a more difficult challenge in a market this is already quite competitive in many areas.

Bottom line: Microsoft’s plan to build cloud centers in China is the latest sign of Beijing’s intent to open its telecoms services market to foreign investment.

Related postings 相关文章:

◙ Telecoms Infrastructure Prepares to Open 中国电信基建市场或更开放

◙ China Telecom Opens Door for Foreign Telcos 中国电信在英国推出MVNO业务 或为外国电信企业进入中国铺路

◙ Microsoft Looks for Place in China Cloud 微软投身中国云计算大潮

Solar Shares: De-listings Ahead? 太阳能股票：未来会退市？

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Shares of solar panel makers took a beating last week, as brokerages downgraded a few amid flare-ups in the trade war between the US and China for an industry already suffering through its worst-ever downturn that has pushed most companies into the red. But while the war of words continues between Washington and Beijing, an even more interesting and potentially devastating low-key war is going on with the solar companies’ shares, which could soon face the very really threat of de-listing from the New York and Nasdaq stock exchanges. JA Solar (Nasdaq: JASO) crossed a quiet but critical threshold on May 18, when its shares closed below the critical $1 mark for the first time, ending that day at 89 cents. Since then they have gone 6 consecutive trading days without rising back above the $1 mark, closing last Friday at 92 cents. Stock market followers will know that rules dictate that US listed companies must maintain their share prices above $1 as a rule to remain listed on the big boards, and that trading below that mark for more than 30 days is grounds for potential delisting. JA Solar, whose market capitalization now stands at $186 million, is the first major player to fall below the $1 mark, but others could soon follow. Suntech (NYSE: STP), which calls itself the market leader even though its market cap is smaller than several of its rivals, saw its shares tumble 8 percent to $1.78 on Friday, near an all-time low, after HSBC reduced its price target for the company. (English article) HSBC cut its Suntech price target to $1 from a previous $1.27, and 13 of the 18 analysts who have updated their ratings on the company since last week now recommend a “sell”. Others who are hovering dangerously close to the de-listing range include Renesola (NYSE: SOL), now trading at $1.33, and Yingli (NYSE: YGE), whose shares now trade at $2.62. It’s unclear what would happen to JA Solar or any of the others if their shares really did trade below $1 for 30 days, as they could technically do a reverse stock split to bring their shares back above the $1 mark. But perhaps more importantly, falling below the psychologically critical $1 mark may finally be the wake-up call that many of these companies need to tell them they should seriously consider merging with some of their rivals to consolidate the crowded sector, or risk being de-listed or worse.

Bottom line: Several of China’s struggling solar shares are in danger de-listing, which could finally push some to consider mergers with rivals to save themselves.

Related postings 相关文章:

◙ Solar Storm Heats Up in US, China 中美太阳能产品征税之争升温

◙ Solar Comments: Consolidation Chinese Style? 太阳能行业：中国式整合

◙ Passive Beijing Blasts New US Solar Tariffs 中国炮轰美高关税不实用 解决太阳能产品纷争需更主动

Solar Storm Heats Up in US, China 中美太阳能产品征税之争升温

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The war of words is heating up in the ongoing US-China trade war over unfair subsidy allegations against Chinese solar panel makers, with unusually tough new sounds coming from both sides of the Pacific that indicate the protectionists may be losing some momentum. I’ll admit I was surprised by both of the latest developments, the first of which saw the Chinese solar panel makers finally come together to hold an unusual press conference in Shanghai denouncing planned punitive tariffs announced by the US last week ranging from 30 percent to 250 percent. (English article; previous post) The second development saw the trade group representing US panel makers issue its own statement that indicates another major US trade group representing the broader solar power sector may also be preparing to oppose the latest proposed punitive tariffs, which are set to take effect in October. Let’s take a look at the Shanghai press conference first, where the CEO of industry leader Suntech (NYSE: STP), after remaining low-key and relatively cautious throughout the dispute that began nearly a year ago, spoke out loudly against the proposed new tariffs, calling the unfair allegations untrue. A spokesman for the industry organization that organized the event further warned that China’s solar panel makers reserved the right to urge Beijing to take retaliatory action if the US actually does implement the new tariffs. Beijing has issued a steady stream of angry denunciations of previous US moves in this case, including one after last week’s decision; but industry executives themselves have tried to maintain a more positive stance by pointing out they are strong contributors to the US economy by providing jobs to upstream industries and also helping to promote the US solar power sector. This change of tactics by the Chinese panel makers is probably the result of their realization that their softer, more persuasive approach clearly didn’t work. Adding to the pressure against the US decision are the latest signs that a major US trade group, the Solar Energy Industries Association, may be preparing to enter the war on the side of the Chinese. That’s my interpretation based on a press release from another industry group, the Coalition for American Solar Manufacturing (CASM), which represents US solar cell producers who filed the original complaint against the Chinese companies. In the press release, CASM warns the Solar Energy Industries Association to respect a previous pledge to remain neutral in the dispute, and condemns the SEIA’s calls for a “premature settlement” of the matter. (CASM announcement) Clearly the bigger solar power association is listening to its power-producing members, who will suffer the most if they suddenly have to pay 30-250 percent more for their Chinese solar panels. Both of these developments show that the US solar panel makers are losing some of their advantage in this dispute, and pressure is mounting from both inside and outside the US for a settlement to avert a trade war. Now that people finally realize how high the stakes are, I would look for serious talks to begin soon that should offer a better than 50 percent chance of a settlement before October.

Bottom line: Growing pressure by forces opposed to punitive US tariffs against Chinese solar panel makers mean the chances of a settlement in the dispute are greater than 50 percent.

Related postings 相关文章:

◙ Passive Beijing Blasts New US Solar Tariffs 中国炮轰美高关税不实用 解决太阳能产品纷争需更主动

◙ Solar War Reignites With Big US Tariffs 美国拟对中国太阳能电池高征税

◙ Suntech, Canadian Solar in Latest PR Moves 尚德电力和Canadian Solar就西方倾销顾虑作出回应

 

Huawei Goes on the Offensive 华为发起攻势

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Maybe I’ve become a bit jaded after writing about Chinese companies for so long, but I’ll openly admit that I was quite encouraged by the latest reports that telecoms equipment giant Huawei has lodged a complaint in Europe accusing a company of monopolistic practices. The reason for my excitement is that after years of watching Chinese companies constantly assume a defensive posture on the global stage, it’s refreshing to finally see one go on the offensive to fight what it believes is unfair treatment. Whenever Chinese companies appear in the headlines due to conflicts overseas, the chances are nearly 100 percent that those companies are coming under attack by local interests, sometimes over allegations of unfair subsidies, and other times due to nationalistic concerns. In nearly every case, the accused Chinese company is likely to quickly assume a defensive posture, complaining that it’s being treated unfairly and arguing why the allegations are untrue. So it’s nice for once to finally see a Chinese company take the offensive and fight for its right when it believes it is receiving unfair treatment in the market. In this case Huawei lodging its anti-monopoly complaint after failing to license key 3G technology patents from a company called InterDigital (Nasdaq: IDCC). (English article) Huawei is  accusing InterDigital of extortion, saying the company made “unreasonable and discriminatory demands” for rights to the patents for its 3G wireless technology. Huawei filed its complaint after it was sued in the US last year for patent infringement by InterDigital, which also sued Nokia (Helsinki: NOK1V) and LG Electronics (Seoul: 066570). So from that perspective, Huawei’s latest action is a bit reactionary to InterDigital’s lawsuit, and in fact this kind of suit and countersuit has unfortunately become quite common in the technology industry. But from my perspective, this kind of action by Huawei at least shows it finally realizes the global market is a tough and competitive place, and the only way it will be able to survive and succeed there is to play by the same rules as other major global companies. That means that it, as well as other Chinese companies, will need to use more aggressive tactics, not only when they come under direct attack but also when they are entering markets where local interests might want to use excuses like national security, unfair subsidies and broader xenophobic fears to keep them out of the market. Huawei tried out its legal attack skills at home last year, when it sued crosstown rival ZTE (HKEx: 763; Shenzhen: 000063) for patent infringement. (previous post) Now it appears to be taking its more aggressive strategy to the global stage, which, combined with a well-funded public relations campaign, could finally help it win better access to Western markets in the next couple of years.

Bottom line: Huawei’s new anti-monopoly complaint in Europe reflects a new more offensive posture that more Chinese companies need to take to succeed on the world stage.

Related postings 相关文章:

◙ Huawei Follows ZTE to Lower Profits 继中兴之后华为利润也降低

◙ Beijing Help Undermines Huawei Image Drive 中国商务部替华为出面或适得其反

◙ ICBC, Huawei: It’s Cold Out There 工商银行、华为：国外市场冷清

China Telecom Opens Door for Foreign Telcos 中国电信在英国推出MVNO业务 或为外国电信企业进入中国铺路

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The headlines are buzzing today with new of the formal launch of the first virtual mobile network by a Chinese telco outside China, with China Telecom (HKEx: 728; NYSE: CHA) partnering with European mobile carrier Everything Everywhere to offer service in the United Kingdom. (English article; Chinese article) But from my perspective, the much more interesting proposition could be that this move might finally mean that Chinese telcos themselves are open to this kind of deal, potentially paving the way for one of the big foreign telcos to finally enter China as a mobile virtual network operator (MVNO). Such MVNOs let companies quickly enter foreign markets by offering service under their own brand over an existing carrier’s network. Let’s look at the latest news first, which saw the official launch this week of China Telecom’s new service, called CTExcelbiz, following an initial announcement of its plan to become an MVNO in Britain back in January. (previous post) Under that previously announced plan, China Telecom said it would launch service in Britain first, targeting the growing number of Chinese living and traveling to Europe, and then potentially draw on Everything Everywhere’s ties to France and Germany to expand to those markets. From the China perspective, this move by China Telecom, the smallest of China’s 3 mobile carriers, seems to indicate that the company itself might be open to partnering with a foreign telco in its home China market for a similar MVNO. Such a partnership would quickly give China Telecom a potentially big new revenue source from its foreign partner, and would allow it to make better use of its relatively underutilized state-of-the-art 3G network. The Chinese telecoms regulator also said earlier this year it wants to open the market more to infrastructure investment by foreign companies (previous post), so allowing foreign MVNOs into the market would help to meet that aim, and also give China’s telcos access to foreign technology and services that can take advantage of their 3G networks. Britain’s Virigin Mobile (London: 1044Q), one of the world’s most successful MVNO operators, was reportedly in talks to form an MVNO in China in the mid-2000s, but no deal was ever announced. Much has changed since then, most notably a reorganization of China’s mobile sector, the launch of 3G networks, and an increasing openness by Beijing to let foreign investment into the sensitive telecoms infrastructure space. If China Telecom’s move signals an opening of the market to foreign MVNOs, there are certainly a number of operators that would be interested. One of Everything Everywhere’s major stakeholders, France Telecom (Paris: FTE), has shown previous interest in China, as has European giant Vodafone (London: VOD), South Korea’s SK Telecom (Seoul: 017670) and Spain’s Telefonica (Spain: TEF). With all those carriers interested in China and China’s own increasing openness, I wouldn’t be surprised to see an announcement of the first MVNO in China by a foreign telco in the next 18 months, most likely with China Telecom as a launch partner.

Bottom line: China Telecom’s move into Britain means Beijing may soon let foreign telcos enter China as mobile virtual network operators, with a first deal possible in the next 18 months.

Related postings 相关文章:

◙ China Telcos In New Drives at Home, Abroad 中国三大电信运营商海内外发力

◙ Telecoms Infrastructure Prepares to Open 中国电信基建市场或更开放

◙ China 3G: Entering Slow-Growth Phase? 中国3G：进入缓慢增长阶段？

 

Lenovo Results: Second Time the Charm? 联想在日德的收购会重蹈覆辙？

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Top Chinese PC maker Lenovo (HKEx: 992) has just announced some impressive results, saying recent acquisitions in Germany and Japan helped to lift its profit 60 percent in its latest fiscal quarter, as revenue rose an equally strong 54 percent. (Earnings announcement) But as a long-time China watcher, my first reaction is: I’ve seen this before, as the company’s results also got a quick boost back in 2006 after its ground-breaking purchase of IBM’s (NYSE: IBM) PC assets, which instantly gave its revenue a major boost with a large new global presence. But history watchers will also remember that honeymoon period was relatively short lived, and Lenovo later suffered big losses and launched a major reorganization after many of IBM’s former clients defected and it couldn’t efficiently run IBM’s overseas operations. So the question now becomes, are we going to see an encore performance of the IBM deal, which would see Lenovo’s fortunes rapidly fall and end with another reorganization; or will it learn from its previous IBM experience and this time do better, perhaps even achieving its goal of overtaking Hewlett-Packard (NYSE: HPQ) to become the world’s largest PC company? Before I gave my answer, let’s take a quick look at the big picture, starting with the latest acquisitions that saw Lenovo purchase German PC maker Medion and take over the PC operations of Japan’s NEC (Tokyo: 6701) last year. The US may have been a difficult labor market for Lenovo, but the challenges there will seem small compared to what it will face in Japan and Germany, the former due to its tradition of companies providing lifetime employment to workers and the latter due to its strong labor unions. Those kinds of labor issues were largely behind the failure of TCL’s (HKEx: 1070) purchase of a French TV maker and the purchase of Siemens’ (Frankfurt; SIEGn) cellphone assets by Taiwan’s BenQ nearly a decade ago. Lenovo was a little smarter this time in Japan, taking over NEC’s PC operations through a joint venture rather than an outright purchase, meaning NEC will remain as a partner to help to run the operation. But TCL also tried the joint venture approach with France’s Thomson, and clearly that didn’t work. In terms of customer defections, I would also expect those to start happening soon. In this case, the defections could be even worse, since Japanese and German consumers and businesses are especially quality conscious, and are unlikely to like the idea that they are buying computers from a Chinese company instead of a German or Japanese one. All that said, look for both of these acquisitions to run into problems, with labor issues likely to flare up in the next year and customer defections to accelerate as corporate purchasing contracts expire. The situation could become worse as many of Lenovo’s recent forays into new product areas are also likely to run into trouble, meaning the company could quickly see its new zooming top and bottom lines start to stumble, setting the stage for yet another reorganization in the next 2-3 years.

Bottom line: Lenovo could soon see history repeat, with strong results after 2 recent acquisitions setting the stage for integration difficulties and an eventual reorganization.

Related postings 相关文章:

◙ Lenovo’s TV Gamble: Failure Ahead? 联想电视赌注：未来会失败吗？

◙ TCL Cellphones: History Repeats Itself TCL手机业务历史重演

◙ Lenovo Completes Leadership Change, Yang Uninspired 联想完成高层调整，杨元庆难鼓舞人心

Solar Comments: Consolidation Chinese Style? 太阳能行业：中国式整合

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When someone says an industry is in need of consolidation, the assumption is usually that mergers and bankruptcies will reduce overheated competition and excess capacity to create a more efficient and profitable sector. But the concept seems to have a completely different meaning in China, where 2 of the nation’s top solar panel makers discussed the consolidation concept in their latest earnings reports even though we’ve yet to see any major companies close or merge among a money-losing group that now produces more than half the world’s solar cells. In announcing fresh major new losses for their latest reporting quarters, Suntech (NYSE: STP) and Trina Solar (NYSE: TSL) both used the “c” word, with the latter saying specifically it sees further signs of industry consolidation happening. (Suntech earnings; Trina earnings) Suntech was less direct, saying simply it was consolidating its own operations to close down some of its less efficient facilities. Obviously there could be M&A deals now being negotiated that are still secret, but to the best of my knowledge there has been little or no consolidation happening in this sector that has been suffering from overcapacity for a year now. Several US companies had to close last year, but they were mostly smaller players and those bankruptcies happened almost a year ago. Other than that, the only deal I’ve seen so far this year was a small acquisition in January of a small German manufacturer by LDK Solar (NYSE: LDK). (previous post) China watchers will know that consolidation of any industry in China — especially a strategic one like solar that Beijing wants very much to develop — is extremely difficult due to the government’s willingness to support money-losing companies indefinitely with loans from state-owned banks and other public funding sources. That means even the most money-losing companies may never close if the government doesn’t want them to. What’s more, mergers are also extremely difficult, as most big manufacturers get strong support from local governments that worry that any such mergers might result in the closure of manufacturing facilities that contribute to their local economies. So what consolidation does Trina see exactly? Perhaps the answer lies in Suntech’s comments. Rather than consolidation through combinations and closures, the industry may have to follow Suntech’s example and see individual manufacturers close down their less efficient facilities. That approach could work for relatively well for more efficient companies like Suntech, though a less efficient player like LDK — which already announced massive layoffs earlier this year (previous post) — might have to shutter the  majority of its operations to return to profitability. This kind of consolidation could be the most likely and practical, but will also mean we could expect to see some significant drops in capacity at Chinese solar companies as they self-consolidate on their march back to profitability.

Bottom line: Chinese solar cell makers, unable to consolidate through mergers and closures, are starting to close less efficient factories to reduce overcapacity and return the sector to health.

Related postings 相关文章:

◙ Sohu Disappoints Again, LDK Cuts Inspire 搜狐再次令人失望，江西赛维裁员鼓舞人心

◙ Passive Beijing Blasts New US Solar Tariffs 中国炮轰美高关税不实用 解决太阳能产品纷争需更主动

◙ LDK Cuts, Suntech Waits As Solar Winter Nears End 太阳能行业冬季将结束：赛维裁员，尚德等待